This Background Note explores recent evidence on Budget Support to understand how such support has performed over time against its original rationale and expectations. 

We analyse the evidence for each of the expected benefits in turn, finding that performance has improved over time in a number of areas (particularly transaction costs and increased effectiveness of partner country public financial management systems). Limited evidence, however, and the complexity of measuring progress on some of the benefits, has resulted in an inconclusive picture.

The Background Note outlines the original rationale and expectations, and the shifts in the aid architecture that led to the rise of the ‘new’ form of Budget Support. We then test the expected benefits in turn, using an assumed rationale. In doing so, we ask how well Budget Support has fared, given its original rationale, and explore design issues. Finally, we suggest ways in which Budget Support could be re-designed to achieve its original rationale.